S.Africa vehicle sales fall on economic slowdown

South African new vehicle sales plunged by 30.1 percent in the year to March, industry data showed on Thursday, indicating that the sector remains under stress due to depressed domestic demand.

Vehicles sales have been in negative territory for almost two years, reflecting consumers’ waning appetite in the face of an economic decline, and Thursday’s data lends further weight to the argument for more aggressive domestic interest rate cuts this year.

The National Association of Automobile Manufacturers (NAAMSA) said new vehicle sales in March fell to 33,326 units in March compared with 47,684 units sold in the same month last year.

South Africa’s central bank cut its key repo lending rate by 100 basis points to 9.5 percent last month to boost flagging economic growth which has raised fears of the recession that has hit other countries.

The reduction added to 150 basis points in cuts since December, after the Reserve Bank lifted interest rates by 5 percentage points between June 2006 and June 2008 in a bid to tame inflation.

NAAMSA said the improved inflation outlook and any further interest rate reductions would take time to translate into improved demand for durable goods, with domestic sales of new vehicles expected to remain under pressure in the short to medium term.

“However, a revival in consumer expenditure on the back of lower interest rates, together with stimulatory government spending, should start to lend support to the domestic market during the second half of the year,” it added.

South Africa’s motor industry — one of the biggest in manufacturing sector and a key employer, has taken the brunt of the economic slowdown, and has sought support from the government.

NAAMSA said exports of South African manufactured vehicles also declined, by 22 percent in the year to March, adding that the slowdown in major export markets in the euro zone, Japan and the United States would translate into further falls.

There were indications, however, that the auto markets in some of these other regions were seeing improvement or at least stabilisation. Figures from Germany’s VDIK car importers association on Thursday showed a sharp rise in new car registrations in Europe’s biggest auto market in March, thanks to government incentives for motorists to junk old cars and buy new ones. .

This followed news overnight that U.S. auto sales fell a smaller-than-expected 37 percent last month, raising hopes that the world’s largest car market is nearing a bottom.

Sourced via af.reuters.com